Tight supply of aluminum scrap supports costs, while sluggish demand limits upside room for ADC12 [SMM Morning Comment on Cast Aluminum Alloy]

8.6 SMM Morning Comment on Cast Aluminum Alloy

Futures: Overnight, the most-traded AD2511 cast aluminum alloy futures contract opened at 20,010 yuan/mt, with a high of 20,015 yuan/mt, a low of 19,945 yuan/mt, and closed at 19,970 yuan/mt, down 35 yuan/mt or 0.17% from the previous close. Trading volume was 865 lots, and open interest was 8,213 lots, with bulls mainly reducing their positions.    

Spot-Futures Price Spread Daily Report: According to SMM data, on August 5, the SMM ADC12 spot price was at a theoretical premium of 105 yuan/mt over the closing price of the most-traded cast aluminum alloy futures contract (AD2511) at 10:15 a.m.

Aluminum Scrap: On Tuesday, the spot primary aluminum price rebounded by 40 yuan/mt from the previous trading day, with SMM A00 spot closing at 20,520 yuan/mt. The aluminum scrap market prices generally increased. Baled UBC aluminum scrap was quoted at 15,250-15,750 yuan/mt (tax-exclusive), and shredded aluminum tense scrap (water price) was quoted at 16,800-17,300 yuan/mt (tax-exclusive price). Both baled UBC and shredded aluminum tense scrap (water price) prices increased by 100 yuan/mt. It is expected that the price center of the aluminum scrap market this week may further return to off-season levels. The bearish expectations for primary aluminum (such as macro pressure and high inventory) have not dissipated, coupled with the continued weak demand during the off-season, limiting the upside room for aluminum scrap as a whole; however, the tight supply of raw materials still provides medium and long-term bottom support. Shredded aluminum tense scrap, supported by the supply side, has relatively strong price resilience and is expected to fluctuate rangebound within 16,500-17,000 yuan/mt (tax-exclusive).

Silicon Metal: (1) Price: Yesterday, SMM east China oxygen-blown #553 silicon metal was priced at 9,100-9,400 yuan/mt, and #441 silicon metal was priced at 9,500-9,600 yuan/mt. The futures market prices fluctuated with a stronger bias in gains and losses, with traders and some silicon enterprises following the quotes. The spot silicon metal transaction price center was weak, and downstream market transactions were made on a purchasing as needed basis. (2) Supply and Demand: In July, the silicon metal supply-demand balance showed destocking. In August, both supply and demand increased, with the demand side seeing an increase in polysilicon production, which boosted silicon metal demand. On the supply side, the operating rate in Xinjiang increased, coupled with a small increase in the southwest region, leading to an increase in silicon metal supply.

Overseas Market: Overseas ADC12 quotes remained stable at 2,460-2,480 US dollars/mt, with imported spot prices remaining flat at around 19,300 yuan/mt, maintaining an immediate loss status for imports. Local ADC12 quotes in Thailand were concentrated at 82-83 Thai baht/kg (tax-exclusive).

Inventory: According to SMM statistics, on August 5, the daily social inventory of secondary aluminum alloy ingots in Foshan, Ningbo, and Wuxi totaled 31,283 mt, down 63 mt from the previous trading day and up 347 mt from Tuesday (July 29) of the previous week.

Summary: Although aluminum prices only rebounded slightly on Tuesday, due to the reduced output of new scrap during the off-season and the suppression of dismantling volumes by high temperatures, the tight supply of aluminum scrap led to a rapid price increase, increasing the cost pressure for secondary aluminum plants and strengthening their willingness to lower prices. However, the demand side was dragged down by high temperatures, leading to a decline in downstream operating rates, which resulted in reduced orders for secondary aluminum plants and sluggish market transactions, struggling to rise in price. Overall, cost support will continue to limit the downside room for prices, while high social inventory and persistently sluggish actual demand suppress upward momentum. The ADC12 price is expected to fluctuate rangebound in the short term.

[Data source statement: Except for publicly available information, other data are derived from public information, market exchanges, and processed by SMM based on its internal database model, for reference only and not constituting decision-making advice.]